R (Cameron) v HMRC (2012)

Summary

If a taxpayer had acquired a legitimate expectation that he was entitled to the benefit of a particular concession, he also had a legitimate expectation that such concession would not be withdrawn retrospectively and that any withdrawal would be managed fairly.

Facts

The claimant seafarers (C) applied for judicial review of the decision of the defendant commissioners to refuse their claims for seafarers' earnings deduction and foreign earnings deduction.

Foreign earnings deduction was introduced by the Finance Act 1977 Sch.7 and was later confined to persons employed as seafarers. As of the tax year 2006/07 the relevant legislative provisions were contained within theIncome Tax (Earnings and Pensions) Act 2003 Pt 5 Ch 6. Under the legislation a qualifying or eligible period was calculated by reference to days of absence from the United Kingdom. A person would be regarded as being absent from the UK on any day only if he was absent "at the end of the day". C made claims for foreign earnings deduction and seafarers' earnings deduction on the basis that they were absent from the UK at the end of a day if they were on board a ship which had left its berth before midnight on a voyage which would take it outside the territorial waters of the UK. Their case was that the commissioners had published guidance to that effect. That was referred to as "the broad concession". The commissioners disallowed C's claims on the ground that the concession was limited to the situation where the vessel was en route to a foreign port. That was referred to as "the middle concession".

The commissioners argued that in each of the relevant tax years C's legitimate expectation was that their claims to deduction would be determined in accordance with the middle concession; even if C had acquired a legitimate expectation that they would be taxed in accordance with the broad concession, there came a time when the legitimate expectation ceased; the commissioners should not be bound by the broad concession once they had written to C denying its existence or application.

Held

(1) A clear statement published by the commissioners could give rise to a legitimate expectation on the part of taxpayers as to how they would be taxed, R. v Inland Revenue Commissioners Ex p. MFK Underwriting Agents Ltd [1990] 1 W.L.R. 1545 and R. (on the application of Davies) v Revenue and Customs Commissioners [2011] UKSC 47, [2011] 1 W.L.R. 2625followed. Assuming, as C alleged, that the terms of the broad concession were published in a formal document produced by the commissioners with the aim of providing assistance to seafarers who were contemplating making claims, the commissioners would remain bound by the broad concession until they had given notice to all seafarers potentially eligible to claim that the concession was to be withdrawn or altered. Effective notice of a change could be given only if there was publication in some form to the whole class of potentially eligible taxpayers. If a taxpayer had acquired a legitimate expectation that he was entitled to the benefit of a particular concession, he also had a legitimate expectation that such concession would not be withdrawn retrospectively and that any withdrawal would be managed fairly. A taxpayer was entitled to rely upon a statement made in a formal publication unless and until the statement was revoked, withdrawn or altered, and the fact that an employee of the commissioners expressed a contrary opinion did not make reliance by the taxpayer on the document unreasonable (see paras 64-73 of judgment). (2) The middle concession had its genesis in a letter sent by the commissioners to a firm of accountants. It was impossible to determine the extent to which that letter had been publicised. There was no evidence that the commissioners published a statement of the middle concession in any document which was intended to be available to all seafarers who were likely to make claims. By contrast, documents published by the commissioners to assist seafarers contained an unequivocal statement of the broad concession. There was no evidence that the commissioners did or said anything subsequently to suggest to the world at large that that statement had been superseded or altered. Although the commissioners maintained in correspondence that C's entitlement should be determined in accordance with the middle concession, that correspondence was personal to C. The publication of the broad concession satisfied the test in MFK and gave rise to a legitimate expectation, MFK followed. C were entitled to rely on it and had relied on it to their detriment (paras 74-92).